A

Presentation on
Godrej Interio ( Furniture Industry)
Presented By:- LTB05
Deeptanshu Dwivedi 057
Asem Naocha Singh 056
Maitrey Pandey 058
Poorva Narain 080
Priyanka 088

FURNITURE INDUSTRY IN INDIA

Market size- approximately Rs.65000 Crores

The range of indigenous furniture available in
India includes both residential and contract
system furniture, with an increased
concentration in office and household
furniture.
Furniture parts and contract furniture in wood,
metal, plastic, cane and bamboo.
80% of the Indian market lies in the
unorganized sector.

FURNITURE INDUSTRY IN INDIA

The most popular forms of Indian furniture
include:
Home
Garden furniture
Office furniture
Kitchen furniture
Bedroom furniture
Upholstered furniture
Seating

The annual Per Capita Consumption of

Furniture in India is not more than INR 2000.
This sector has some 5000 active companies
of which 65% produce wooden furniture,
25% metal furniture and 10% manufacture
accessories and furnishing items in plastic.
In the wood used for furniture in India, teak
accounts for almost 50% while Sal and
Deodar for about 20%; Mahogany and
balance 30% between white cedar, Silver
oak and pinewood, in order to conserve the
forests, the cutting of soft jungle wood has
been banned by the Indian government.

Domestic furniture accounts for 65% of the

production value whilst corporate/office
furniture represents % of the production,
hotel furniture 15% a15nd other furniture.
One study carried out by the World Bank
attributed 33% of private consumption in
India to the richest 10% of the population,
whereas the poorest decile of the Indian
population claimed only 3% of the
consumption. If the richest 20% of the
population are considered, the quota of
total consumption attributable to this
group is around 47%.

PROS AND CONS OF THE FURNITURE INDUSTRY IN

INDIA

Pros
Huge market still untapped
Largest open market economy
Consumers are exposed to information age and
becoming more demanding in terms of product quality,
usage and design.
Business model is outdated, unorganized and high on
operating cost.
Cons
No Do-It Yourself culture
Needs to change sourcing strategy
Competitors with very low prices
Low home and garden expenditure

BRANDS IN ORGANIZED MARKET:

Godrej Interio
Home Town
Zuari
Usha Lexus
Durian
Damro

GODREJ INTERIO OVERVIEW

Established in 1897, the Company was incorporated

with limited liability on March 3, 1932, under the
Indian Companies Act, 1913.
Godrej Interio is a business unit of Godrej & Boyce
Mfg. Co. Ltd. - part of the Godrej Group, one of
Indias largest engineering and consumer product
groups.
Godrej Interio is Indias largest furniture brand.
From manufacturing the humble Storwel cupboard
80 years back to being a vibrant, innovative brand
with a diverse portfolio.

GODREJ INTERIO OVERVIEW

The Company has a nationwide network of

GODREJ INTERIO Retail Stores, operated
by the Company and the Franchisees,
more than 2,200 Wholesale Dealers, and
more than 18,000 Retail Outlets.
It present across India through our 50
exclusive showrooms in 18 cities and
through 800 dealer outlets.
Has employees around 26,000 (2013).

PRODUCTS (INTERIO FURNITURE)

Office Furniture - Desking, Seating,

Open Plan Office Systems, Computer
Furniture and Storages.
Home Furniture - Living, Dining,
Bedroom Furniture; Kitchen Cabinets.
Laboratory Furniture, Marine
Accommodation, Healthcare Furniture;
Turnkey Interiors, Carpet Tiles, and
Mattresses

REVENUE FROM OPERATIONS (INCLUDING

EXCISE DUTY)

Fiscal Year 2013-14: 78 billion

(US$1.3 billion) Combined Revenue
from Operations of the Company and
its major subsidiaries and affiliates, for
FY 2013-14: 247 billion (US$4.1
billion) and according to 2015, its
Revenue is 320 billion (US$5.0billion).

FINANCIAL STATEMENT ANALYSIS

Financial statement analysis is an

exceptionally powerful tool for a variety of
users of financial statements, each having
different objectives in learning about the
financial circumstances of the entity.
Users of financial statement areCreditors
Investors
Management
Regulatory Authorities

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Horizontal Analysis
Financial statements present comparative information for at
least two years.
Calculates the amount and percentage changes from the
previous year to current year.

Trend Analysis
Calculation of percentage changes in financial statement
items for a number of successive years.
It is an extension of horizontal analysis.
First a value of 100 is assigned to the items in the financial
statement in the base year and then express the amounts in
the following years as a percentage of the base year value.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Vertical Analysis
Proportional expression of the amount of each item
on a financial statement to the statement total.
Common size statements are prepared in which the
items within each statement are expressed in
percentages of some common number and always
add up to 100.
It is conventional to express items in the profit and
loss account as percentage to sales and balance
sheet items as percentages of the total of
shareholders` equity and liabilities.

Ratio
Ratio Analysis
Analysis

Profitability
Profitability
Ratio
Ratio

Profit
Profit Margin
Margin
Asset
Turnover
Asset Turnover
Return
Return on
on Assets
Assets
Return
on
Return on Equity
Equity
Earning
Per
Earning Per Share
Share

Liquidity
Liquidity
Ratios
Ratios

Current
Current Ratio
Ratio
Quick
Ratio
Quick Ratio
Debtor
Debtor Turnover
Turnover
Inventory
Inventory Turnover
Turnover

Solvency
Solvency
Ratios
Ratios

Debt
Debt to
to Equity
Equity
Ratio
Ratio
Liability
Liability to
to
Equity
Ratio
Equity Ratio
Interest
Interest
Coverage
Coverage Ratio
Ratio

Capital
Capital
Market
Market
Ratios
Ratios
Price
Price Earning
Earning Ratio
Ratio
Dividend
Yield
Dividend Yield
Price
Price to
to Book
Book Ratio
Ratio

PROFITABILITY RATIOS
1.Profit Margin/Return on Sales
Measures the amount of net profit
earned by each rupee of revenue.
Profit Margin = [PAT Sales] x 100
The pressure on margin should be
analyzed by looking at major
categories of expenses such as
material , salaries ,wages
,advertising etc.

2010 2011

2011 2012

2012 2013

2013 2014

2014 2015

11.29
%

14.01
%

6.6%

8.23% 10.23
%

Comment on Net Profit Margin: It has been observed Godrej Industries Limited (GIL)
enjoy a profit margin of 11.99 % in the year ending March 2011 which got increased
to 14.01 % in year 2012. This increase in net profit margin is due to the reason of
substantial increase in the net sales and relatively lower increase in the expenses or
cost of sales.
Then it is observed there is a substantial decrease in the net profit margin from 14.01
% in the year 2012 to 6.6 % in the year 2013. It was apparent that though there was
an increase in the sales turnover yet there was a substantial increase in the expenses
category (power and fuel from 97.48 crore in 2012 to 108.82 crore in 2013) and that
even after the increase in the sales the company experiences the pressure in its profit
margin.
Again it is observed that there is an increase in the net profit margin from 6.6 % in the
year 2013 to 8.23 % in the tear 2014. It is because of the reason of an increase in
other income from 93.54 crore in 2013 to 144.98 crore in 2014 although the even
though there is a decrease in the net sales and an increase in the cost of sales.
The net profit margin increases in the year 2015 also from 8.23 % to 10.23% and this
is due to the reason of a substantial decrease in the cost of sales (decrease in raw
materials consumption as a result of more efficient employees).

2.

Asset Turnover
Measures the firm's efficiency in utilizing its
assets. It indicates how many times the assets were
turned over in a period in order to generate sales.
Asset Turnover = [Sales Average Total Assets]
High: we can infer that the enterprise is managing
its assets efficiently.
Low: it implies that there is presence of more assets
than a business needs for its operations.
Decrease in asset turnover could be because of
excess capacity , frequent breakdown, nonavailability of raw materials or power, strikes and
lock outs and so on.

2010 2011

2011 2012

2012 2013

2013 2014

2014 2015

0.75
times

0.99
times

0.73
times

0.55
times

0.47
times

Comment on Asset Turnover Ratio: It may be

observed that the asset turnover in the year 2011 was
0.75 times which got increased to 0.99 times in the year
2012. This increase in the asset turnover is because of
the efficient management of the inventories and the
resulting increase in net sales.
The asset turnover ratio steadily decreases or declines
from 2013 to 2015 but it can be observed that the net
sales and revenue is almost constant in the above years.
It may be because of the inefficient management of the
inventories (overstocking) and the increased or added
capacity in the fixed assets and not being used.

3.

Return on Assets / Return on investments

Measure of profitability from a given level of
investment. It is an excellent indicator of a
company's over all profitability
Return on Assets = [PAT Average Total Assets]
x 100
2010 2011

20112012

20122013

9%

13.95 4.85
%
%

20132014

20142015

4.55
%

4.77
%

Comment on Return on Assets: It is observed that

the ROA substantially increases from 9 % in the year
2011 to 13.95 % in the year 2012. This is because of
the efficient management and the resulting increased
revenue or sales turnover.
Then it is observed that the ROA consistently declines
from the year 2013 to 2015 even though the net sales
increases in the year 2013 over the sales of 2012 and
remains almost constant in the year 2014 and 2015.
This decrease in the ROA is majorly because of the
substantial increase in the total expenses of GIL.

4.Return on Equity
Measures the profitability from the
shareholders` point of view. It measures the
efficiency in the use of shareholders` funds.
Return on Equity= [PAT Average
Shareholders Equity] x100
Shareholders` expect managers to earn an
ROE higher than the firm's cost of equity.
Decrease: may imply lack of opportunities
that would yield higher returns.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

13.32
%

17.35
%

6.77% 7.82% 9.62%

Comment on Return on Equity:

You can calculate the return on equity of a company by dividing

the PAT (profit after tax) by the average shareholders equity and
multiply by 100. Average shareholders equity is obtained by
dividing the sum of the opening and the closing shareholders
equity by 2. It can be observed from the ratio calculated of the
return on equity of the five years of Godrej Ltd that in the year
2012 the return on equity of the company was 17.35% which got
reduced by 10.78% and reached 6.77% in the year 2013. The
reduction in the return on equity indicates the low efficiency of
the company to tap the beneficial opportunities in the market
which could have increased their market share. This can be
attributed to the reduction in the profit after tax in the year
2013(99.74) in comparison to 2012(201.56). So it can be
concluded that Godrej Ltd was inefficient in tapping the profit
opportunities in the market in the year 2013.

5.Earning Per Share= net profit after

tax for the period attributable to equity
shareholders number of equity
shares outstanding during that period.
20102011

20112012

4.2 per 6.35

share
per
share

20122013

20132014

20142015

2.89
per
share

3.57
per
share

4.43
per
share

Comment on the Earning per Share

You can calculate the earnings per share of a company by
dividing the PAT(profit after tax) by the number of equity
shares outstanding. It can be seen from the ratios calculated
for all the five years of Godrej Ltd for the earnings per share
that there is a drastic fall in the earnings per share in the
year 2013 in comparison to the year 2012, that is from 6.35
in 2012 it fell down to 2.89 in 2013, which is a change of
3.46 per share. The reason for this can be concluded to be
the fall in the fall in profit after tax in the year 2013 (99.74)
in comparison to profit after tax in the year 2012 (201.56).
this denotes the inefficiency of the company in being able to
tap the profits in the market in the year 2013.

LIQUIDITY RATIOS
1.

Current Ratio
Indicates the company's ability to pay its debts in the
short-term. It shows the amount of current assets a
company has per rupee of current liabilities.
Current Ratio = Current Assets Current Liabilities
Rule of the thumb: current ratio is expected to be atleast
2:1.
A large current ratio by itself is not satisfactory measure
of liquidity
when inventories constitute a major part of the current
assets. Quick Ratio is calculated as a supplement to the
current ratio.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0.71:1 0.65:1 0.86:1 0.38:1 0.36:1

Comment on Current Ratio

You can calculate the Current ratio of a company by dividing the current
asset of the company by the current liabilities of the company of the
respective year. Current ratio is expected to be atleast 2:1. A reduction
in the current ratio of company in comparison to previous year denotes
that the company does not enjoy good liquidity condition and must take
necessary measures to improve its liquidity position. It can be observed
from the current ratio calculated of all the five years of Godrej Ltd that
the current ratio of the company fell down from 0.86:1in the year 2013
to 0.38:1 in the year 2014,which shows a significant difference of 0.48.
This reduction in the current ratio can be attributed to the increase in
the current liability of the company in the year 2014 in comparison to
the year 2013. This indicates that the company is not able to enjoy
good liquidity conditions and must take necessary steps and measures
to improve its liquidity position in the market.

Quick Ratio / Acid Test Ratio

All current assets are not equally liquid. While cash
is readily available for use , debtors can be converted
into cash with some effort, and inventories are two
steps away from cash( sale and collection).

Quick Ratio = Quick Assets Current Liabilities,

where
quick assets = current assets inventories
Rule of the thumb: quick ratio is expected to be atleast
1:1
This means that a firm must have atleast as much
liquid assets as its current obligations so that it does
not face any difficulty in paying those obligations.

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0.6:1

0.53:1 1.29:1 0.41:1 0.5:1

Comment on Quick Test/Acid Test Ratio

All current assets are not equally liquid. While cash is readily
available for use, debtors can be converted into cash with some
effort, and inventories are two steps away from cash (sale and
collection).
Quick Ratio = Quick Assets /Current Liabilities
Whereas,
Quick Assets = Current assets Inventories
Rule of the thumb: quick ratio is expected to be at least 1:1
This means that a firm must have at least as much liquid
assets as its current obligations so that it does not face any
difficulty in paying those obligations
It has been observed that the Godrej Company has a quick ratio of
0.60 in march 2011 which further get reduced to 0.53 in march
2012 and it again increased to 1.29 in march 2013 which means
that company does not have sufficient liquid funds in order to pay
off its current liability during march 2012 and it again gets
tremendously reduced to 0.41 in march 2014 and slightly

3.

Debtor Turnover

A company's ability to collect from its customers in a prompt

manner enhances its liquidity.
Debtor Turnover measures the efficacy of a firm's credit policy
and collection mechanism and shows the number of times each
year the debtor turns into cash. It indicate the quality of a firm's
debtors and collection efforts.
Debtor Turnover= Sales Average Debtors , where
average debtor = [opening debtors + closing debtors] 2
High: debtors are being converted rapidly into cash and the
quality of the company's portfolio of debtors is good.
Average Debt Collection / Days` Sale Outstanding
Measures the time taken for collection of debt. It helps the
company to
calculate leads or lags in collection relative to the company's
credit period.
Average Debt Collection = Average Debtors Average Daily
Sales

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

9.53
times

11.24
times

10.73
times

11.95
times

13.99
times

Comment on Debtors Turnover Ratio

A company's ability to collect from its customers in a prompt manner

enhances its liquidity.

Debtor Turnover measures the efficacy of a firm's credit policy and

collection mechanism and shows the number of times each year the debtor
turns into cash. It indicates the quality of a firm's debtors and collection
efforts.
Debtor Turnover= Sales / Average Debtors,
Whereas,

Average Debtor = [opening debtors + closing debtors]/ 2

High: Debtors are being converted rapidly into cash and the quality of
the company's portfolio of debtors is good.
It has been observed that Godrej company debtors turnover in march
2011 was 9.53 and we witnessed that it has increase to 11.23 in next year
i.e. march 2012 which was good for the company in collection of its
outstanding debts and in march 2013 it was slightly decrease to 10.73 and
again the company mange to increase its debtors turnover to 11.95 in
march 2015 and it has moved towards a very good progress in march 2015
in debtors turnover to 13.99 in collection of its outstanding debts.

4.Average Debt Collection Period

Obtained by dividing 360 by the Debtors
Turnover Ratio . Is expressed in terms
of days.
20102011

20112012

20122013

20132014

20142015

37.77 32.02 33.55 30.12 25.73

days days days days days

Comment on Average Debt Collection Period

You can calculate the average debt collection period of a company by dividing
360 by the debtors turnover. Measures the time taken for collection of debt. It
helps the company to calculate leads or lags in collection relative to the
company's credit period. A high average debt collection period denotes a
companys delay in collecting debts and thus reflects its efficiency. A low
average debt collection period reflects that a company is efficiently collecting
the debts on time and on regular basis. From the calculations it can be
concluded that in the year 2011 the average debt collection period was 37.77
days which came down in the year 2012 to 32.02, which is a fall of 5.75 days.
This shows that the company improved its efficiency to collect its debts on
time and thus the average debt collection period reduced and also because
the debtors turnover also increased which resulted in reduction in average
debt collection period. The same is the reason for the fall in the average debt
collection period of the year 2015 which was 25.73, in comparison to the year
2014 which was 30.12.

5.Inventory Turnover
Measure the number of times a company's
inventory is turned into sales.
Inventory Turnover= Cost of Goods Sold
Average Inventories
High: indicates efficient inventory
management .fast-moving inventory. It runs lower
risk of obsolescence and reduces interest,
insurance and storage charges.
Average Inventory holding Period= 360 days
Inventory Turnover

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

6.01
times

7.2
times

11.29
times

6.65
times

9.3
times

Comment on Inventory Turnover Ratio

You can calculate a companys inventory turnover ratio by dividing the
cost of goods sold by the value of its inventory. This inventory figure
can either be averaged over a period of time such as a year, or it can
refer to one particular time, giving a snapshot. A companys inventory
turnover ratio can give you an idea of how well it manages its
resources. A high inventory turnover ratio is a little harder to interpret.
It could mean the company has had unexpectedly strong sales -- a good
sign. Or it could mean the firm is not managing its buying as well as it
might and is having difficulty in administering its inventory. If its ratio is
very low, it may mean the company has much more inventory than it
really needs at any one time. Therefore it has too much of its capital
tied up in goods or raw materials that it will take a long time to sell or
make a profit on. Generally speaking, a business with high profit
margins on its finished goods can worry less about a low turnover ratio.

It may be observed that there has been a significant change in the

inventory turnover of Godrej Ltd from 6.01times in the year 2011 to
7.20times in the year 2012.The change of 1.19times can be said to
have taken place because of the change in the sales from the year
2011(1112.33) to the year 2012 (1438.04). So there is a change of
Rs 325.71cr. This can be taken as a positive sign for the company as
the sales are increasing. It may be observed that there is a change
of 4.64times in the inventory turnover from the year 2013(11.29
times) to the year 2014(6.65 times). The reason for this drastic
change can be attributed to a significant change in the closing
inventories of the year 2013 (Rs138.25cr) and the closing inventory
of the year 2014 (Rs232.17cr). There is a difference of Rs93.92 cr
which is a big difference and this shows that Godrej has been less
efficient in the year 2014 in matching its actual inventory
requirement and the inventory that it has store at the year end.

6.Average Inventory Holding Period

Obtained by dividing 360 days by the
inventory turnover.

20102011

20112012

20122013

20132014

20142015

59.9 50
31.8 54.1 38.7
days days 8
3
0
days days days

Comment on the Average Inventory Holding Period

You can calculate a companys average inventory holding period
by dividing the 360 by the inventory turnover of the respective
year. This figure is always expressed in terms of days. A
companys average inventory holding period tells about a
companys efficiency to dispose of its inventory in time.
It may be observed that there is drastic change in the average
inventory holding period of the 2014 from the preceding year
2013. In the year 2013 the average inventory holding period is
31.886 days whereas in the year 2014 the average inventory
holding period is 54.135 days. Thus there is a difference of
32.249 days, which is a big difference and this shows that Godrej
Ltd has been inefficient in disposing of its inventory on time.

SOLVENCY RATIOS

Long-term solvency of a business is

affected by the extent of debt used to
finance the assets of the company. The
presence of heavy debt in the
company's capital structure is thought
to reduce the company's solvency
because debt is more risky than equity.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

1.

Debt Equity Ratio

A wise mix of debt and equity can increase the return on equity for
two reasons:
Debt is generally cheaper than equity
Interest payments are tax-deductible expense,
Debt Equity Ratio measures the relationship of the capital
provided by the creditors to the amount provided by shareholders. It
indicates the extent of use of financial leverage.
Debt Equity Ratio = Debt Equity
debt includes interest bearing interest-bearing liabilities both short
term and long term and secured loan + unsecured loans but
excludes operating liabilities.
High: aggressive use of leverage. A highly leverage company is
more risky for creditors.
Low: a small degree of leverage and the company is too
conservative.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

0.29:1 0.23:1 0.54:1 0.93:1 1.08:1

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment on the Debt Equity Ratio

You can calculate the debt equity ratio of a company by dividing
the debt of an year by the equity of the same year of a company.
In general, a high debt-to-equity ratio indicates that a company
may not be able to generate enough cashto satisfy
itsdebtobligations. However, low debt-to-equity ratios may also
indicate that a company is not taking advantage of the increased
profits that financialleveragemay bring.
Capital-intensive industries tend to have higher debt-to-equity
ratios than low-capital industries because capital-intensive
industries must purchase more property, plants and equipment to
operate. This is why comparison of debt-to-equity ratios is
generally most meaningful among companies within the same
industry, and the definition of a "high" or "low" ratio should be
made within this context.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Lendersand investors usually prefer low debt-to-equity ratios

because their interests are better protected in the event of a
business decline. Thus, firms with high debt-to-equity ratios
may not be able to attract additional capital.
It may be observed from the balance sheet of Godrej Ltd that
they have been successful in attracting increased additional
capital for their company in the year 2013 (0.54:1) as
compared to the year 2012 (0.23:1). This can be attributed to
their low debt equity ratio of the year 2012 of 0.23:1 as lower
the debt equity ratio higher is the probability of a company to
secure additional capital as lenders and investors prefer low
debt equity ratios. In the year 2012 total debt was Rs1497.58cr
and in the year 2013 it was Rs 2484.02cr. so Godrej enjoys
increased confidence of the investors and lenders.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2.Liability to Equity Ratio

Liability to Equity Ratio = All Liabilities
Shareholders`
Equity
All liabilities = Total liabilities
shareholders` equity

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2010-2011

2011-2012

2012-2013

2013-2014

0.01:1 0.11:1 0.25:1 0.11:1

2014-2015

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment on the Liability to Equity Ratio

You can calculate the liability to equity ratio of a company
by dividing all liabilities of a company by the
shareholders equity. It can be observed from the ratio
calculated of the five years of the company that the
liquidity ratio was 0.11 in 2012 which rose to 0.25 in 2013
and then again fell down to 0.11 in the year 2014. This
fluctuation in the liquidity ratio indicates that the
company was not enjoying a good liquidity condition in
the years 2012 and 2014 as the liquidity ratios were low
whereas in the year 2013 the company had a liquidity
ratio of 0.25 which is highest in all the five years and so
the enjoyed maximum liquidity in the year 2013.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

3.Interest Coverage Ratio

Measures the protection available to the
creditors for payment of interest charges by the
company. This shows whether the company has
sufficient income to cover its interest payments.
Interest Coverage Ratio = Profit Before Interest
and Tax Interest Expense
High: adequate safety for payment of interest
even if there were to be a drop in the
company`s earnings.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

1.93:1 2.53:1 1.59:1 1.22:1 0.54:1

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment

You

on Interest Coverage Ratio

can calculate the interest coverage ratio of any company by dividing the
profit before interest and tax by the interest expenses. In general, a high
coverage ratiomay suggest a company is "too safe" and is neglecting
opportunities to magnifyearningsthroughleverage. An interest coverage
ratio below 1.0 indicates that a company is not able to meet its interest
obligations.
Because a company's failure to meet interest payments usually results in
default, the interest coverage ratio is of particular interest tolendersand
bondholdersand acts as amargin of safety. However, because the interest
coverage ratio is based on current earnings and current expenses, it primarily
focuses a company's short-term ability to meet interest obligations.
Some industries tend to have higher interest coverage ratios than others,
and cyclical companies in particular can experience significant swings in their
interest coverage ratios (especially during recessions). Thus, comparison of
interest coverage ratios is generally most meaningful among companies
within the same industry, and the definition of a "high" or "low" ratio should
be made within this context.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

It may be observed from the figures of the interest

coverage ratio of Godrej Ltd that in the year 2015 its
interest coverage ratio is 0.54:1 which is less than 1, which
is not a positive sign as an interest coverage ratio less than
1 indicates that a company is not able to meet its interest
obligations. Higher the interest coverage ratio higher is the
confidence of the shareholders and lenders in the
companys ability to meet the short term interest expenses
and thus they invest more in the company. It may also be
noticed that in the year 2012 the interest coverage ratio of
Godrej Ltd is the highest, 2.53:1, in the last five years
which indicates that the investors would have invested
more in the company in the succeeding year that is 2013.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Capital market ratios relate the market price of a company`s
share to the
company`s earning an dividends.
1. Price Earning Ratio
Popular measure extensively used in investment
analysis. It is considered as an indicator of a firm's
growth prospects.
Price Earning Ratio= Average Stock Price Earning Per
Status
High: stock market is confident in the company`s
future earning growth.
Low: lower faith in in the company`s future earning
growth.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

41.69

39.88

99.71

87.61

78.216

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment on Price Earnings ratio

The price earnings ratio of Godrej during the year 2010-11 was 41.61
which in the year decreased to 39.88 in the year 2011-2012, this shows
that the investors are not confident about the companys future earnings
growth. The earning power of the company decreased this year.
During the year 2012-2013 the earnings ratio of Godrej company
increased to 99.71 which shows that the investors are confident about
the company and they are ready to pay 99.71 rupees to the company for
1 rupee earning. The earning power of the company increased this year.
The price earnings ratio of Godrej company again decreased during the
year 2013-14 to 78.21 which shows that the investors are not confident
about the companys future earnings growth and they are not ready to
pay 78.21 rupees to the company for 1 rupee earnings. The earning
power of the company again decreased this year.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Dividend Yield
Represents the current cash return
to shareholders.
Dividend Yield = Dividend Per
Share Average Stock Price
Total return to shareholder consists of
dividend and change in stock price.
2.

20102011

20112012

20122103

20132014

20142015

0.99 0.69 0.59 0.43 0.50

3
1
7

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment on Dividend Yield

From 2010-11 the company Godrej earned .993% returns
on their investment, while during the year 2011-12 the
company earned 0.69% returns on their investment,
which decreased from the previous year. The dividend
yield further decreased to 0.591% during the year 201213. During the year 2013-14 the dividend yield gradually
declines to 0.50%.
According to these data it is clear that the investors
received the highest return in comparison to the risk
assumed by them during the year 2010-2011. In the rest
of the year the companys dividend yield kept declining
showing a decline in returns earned by shareholders.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

3.

Price to Book Ratio

This compares a company`s stock price with the
book value (accounting value). Book value per
share is equal to the shareholders equity divided
by the number of equity shares.
Price to Book Ratio = Market Price per Share
Book
Value per Share
More than 1: market expects the stock to earn
at a rate higher than the required rate.
Low: under-pricing of shares.

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

2010-2011

2011-2012

2012-2013

2013-2014

2014-2015

6.11

6.61

6.07

6.87

8.14

TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS

Comment on Price to book Ratio

During the year the price to book ratio
was 6.11 times while during the year
2011-12 it was 6.9 times which
gradually shows a marginal decline
during the year 2012-13 to 6.07 times.
But during the year 2013-14 the price
to book ratio decreased to 4.80 this
indicates under pricing of the stocks.